business

The Nikkei stock average briefly edged above 10,000 to an eight-month high on Thursday before slipping 0.1 percent on the day, with worries about rising U.S. interest rates offsetting a jump in steel shares on a brokerage upgrade.

The benchmark Nikkei .N225 inched down 10.16 points to 9,981.33, after rising as high as 10,022.23 in morning trade, its highest since Oct. 7 and a rise of roughly 43 percent from its March bear market low.

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by Jeff Drew

Progress Energy opened the shades Wednesday on an expanded solar energy strategy that calls for the company to provide incentives to individuals and businesses to install solar-power systems.

Raleigh-based Progress (NYSE: PGN) said the goal of its new SunSense program is to increase the amount of solar energy produced in its Carolinas and Florida territories by more than 100 megawatts over the next decade.

The company intends to reach that goal by offering a series of incentives and rebates.

• Progress will pay commercial customers the going market rate for each killowat-hour of electricity produced by newly installed solar power systems. This program will debut in the Carolinas this summer and in Florida next year.

• Also starting this summer is a program that will provide incentives for Progress’ business customers to install solar water heaters. That program will not be available in Florida.

• For residential customers, Progress Energy will pay $1.50 to $2 per watt for residential solar installations. That should cover about 25 percent of the installation cost, Progress said. The program will debut late this summer in the Carolinas and next year in Florida.

• Also for residential customers, Progress will offer rebates to customers who install solar water heating systems. The program, already established in Florida, is being rolled out the in Carolinas.

A fifth arm of the Progress plan will see the company’s Progress Energy Carolinas and Progress Energy Florida subsidiaries install solar panels at selected schools in their territories.

With a market capitalization of almost $10 billion, Progress Energy is the most valuable company in the Raleigh-Durham area and the only one in the federally defined Triangle area to rank among the Fortune 500. Raleigh-based Progress Energy Carolinas supplies electricity to much of the Triangle area.

source: Triangle Business Journal

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By BERNIE BECKER

Executives at General Motors and Chrysler defended the methods they used to whittle down dealerships at a Senate hearing on Wednesday, calling it a painful but necessary part of creating leaner, more competitive companies.
The chief executive of General Motors, Fritz Henderson, and the vice chairman of Chrysler, James E. Press, said dealerships that sold a small number of vehicles weighed down their companies. A more streamlined corps of dealers, they said, was vital for survival.

“Does my heart go out to the dealers who will not be part of the new company? Absolutely,” Mr. Press said in his prepared testimony. “But we’ve had to make many hard choices to create a viable business and preserve jobs for tens of thousands of people.”

But Senator John D. Rockefeller IV, the chairman of the Senate Commerce committee, criticized both executives in his prepared testimony for “somehow implying that the dealers themselves are responsible for the companies’ problems.”

“Let me be very clear,” Mr. Rockefeller, Democrat of West Virginia, said. “I don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help.”

Chrysler is expected to close about 800 dealerships by June 9, according to the testimony. General Motors hopes to reduce its dealerships to about 3,500 by the end of next year from around 6,000 currently.

The G.M. dealers marked for closing will stay open as late as October 2010, when their current agreements with G.M. expire. In general, auto dealerships are independent businesses and are not owned by manufacturers like Chrysler or G.M.

The executives noted in their testimony that government entities, like the Treasury Department and federal bankruptcy courts, had urged them to make tough decisions about which dealerships to close and that those decisions were made as objectively as possible.

The executives said that a variety of factors, including a dealerships’ location, the quality of its facility and its profitability, were used to determine which ones would remain.

“Underperforming dealers,” as the two executives called them, cost sales, reduced customer satisfaction and fractured advertising messages. Mr. Henderson also notedthat many dealerships have been around since the 1940s or 1950s, setting up shop when American automakers had a stranglehold on the market. Now, with the influx of foreign dealerships, many of those dealers are in small towns or rural areas, not the suburban and urban population centers where most people live.

For their part, two small-town dealers disputed that their dealerships were a drag on the auto companies.

Peter Lopez, who owns Chrysler and G.M. dealerships in Spencer, W.Va., and Russell Whatley, who has a Chrysler dealership in Mineral Wells, Tex., said they paid the auto companies for vehicles and parts, as well as other fixed costs, like the right to hang the manufacturer’s sign. Mr. Lopez saidhis dealerships produced roughly 15 percent of his town’s tax revenue and that he even bought additional Chrysler vehicles earlier this year, at the company’s insistence, to help it through the recent downturn. And Mr. Whatley said that he grossed almost $450,000 a month.

But both have been told their Chrysler dealerships will be closed. Mr. Lopez’s G.M. franchise will close next year.

“To be arbitrarily closed, with no compensation, is wasteful and devastating,” Mr. Whatley said.

source: The New York Times

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By Theo Francis

The days of home buying with little or no money down may be back—this time thanks to Uncle Sam.

Blamed for contributing to the housing bubble, zero-down-payment loans largely vanished when the market crashed and Congress blocked seller financing for government-backed loans. Now the federal government will be forking over cash at closing.

Buyers who haven't owned a home for three years or longer are eligible for an $8,000 tax credit, thanks to a provision in this winter's stimulus package. Now, under a little-noticed program announced May 29, the Federal Housing Administration will steer the funds to cover closing costs directly—in some cases even offsetting the 3.5% minimum down payment FHA loans require. That's enough to cover most or all of the down payment and fees for homes up to the U.S. median price, now about $169,000.

Officials hope "monetizing" the tax credit will help revive the housing market, because meeting closing costs is one of the biggest hurdles for new home buyers. The National Association of Home Builders predicts it will add 40,000 to the 160,000 sales originally expected to be spurred by the tax credit. Supporters say the move avoids the worst effects of seller financing, in that the credit is essentially the buyer's money, and government assistance doesn't give sellers a perverse incentive to inflate prices in an unsustainable manner.
Does Down Payment Aid Boost Defaults?

But while seller financing is riskiest, buyers who get down payment help have higher default rates, whether the money comes from government or other sources. That was shown in research by Austin Kelly—who oversees risk modeling at Fannie Mae and Freddie Mac for the FHA—published late last year in the Journal of Housing Research. FHA data on foreclosures show the same pattern.

The new program lets home buyers apply the tax-credit advance against the FHA's 3.5% down payment requirement only if the loan is handled through a state housing-finance agency; otherwise the tax advance may only be used to cover closing costs, to increase the down payment, or to buy down the mortgage's interest rate. The FHA already allows down payment assistance from family, employers, and governmental agencies, but generally bars it from sellers, mortgage writers, or others who would benefit financially from the transaction.

Ultimately, critics complain that the new program transforms a tax credit meant to reward sidelined buyers for taking the plunge into a subsidy that could goose sales to those who otherwise couldn't buy a home—and have little at stake if it doesn't work out. "Didn't we just have this big housing bust where people bought houses they can't afford?" says Peter Schiff, president of brokerage firm Euro Pacific Capital and an economic adviser to Representative Ron Paul's (R-Tex.) long-shot 2008 Presidential campaign. "We don't want people buying houses without using their own money."

source: Business Week

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By Sarah N. Lynch
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Bank of America (BAC), Royal Bank of Canada's RBC Capital Markets (RY) and Deutsche Bank (DB) on Wednesday settled civil charges filed by the Securities and Exchange Commission and the New York Attorney General's office, which accused them of misleading investors of the risks associated with auction-rate securities.

Without admitting or denying the charges, the three firms will provide nearly $6.7 billion to 9,600 customers who invested in auction-rate securities before the market froze in February 2008.

These are the latest settlements in the SEC's wide-ranging auction securities case. Three other settlements were also completed with Wachovia, Citigroup and UBS AG. Meanwhile, the SEC announced a preliminary settlement with Merrill Lynch last August, but a final settlement hasn't yet been reached.

"Through these latest settlements and prior ARS settlements with other firms entered into by the commission, more than $50 billion in liquidity is being made available to tens of thousands of customers so they can get back all of the money they invested in auction rate securities," said Scott Friestad, Deputy Director of the SEC's Division of Enforcement.

Preliminary settlements with Bank of America and RBC were first announced in October last year, but Wednesday's announcement represented final agreements with the firms.

According to the SEC's complaint, which was filed in federal court in New York City, the three firms led investors to believe that auction rate securities were safe and liquid investments that were comparable to money markets.

They made these claims, the SEC alleged, while knowing that their ability to support auctions by purchasing more auction rate securities had been reduced with the stress of the growing credit crisis.

When the banks stopped supporting the auction-rate securities market in February last year, customers were left holding billions in illiquid auction-rate securities.

Under the terms of the settlements, which still await court approval, Bank of America customers will have $4.5 billion of liquidity restored. RBC customers, meanwhile, will have $800 million in liquidity restored and Deutsche Bank customers will have $1.3 billion in restored liquidity.

Each firm will offer to purchase auction-rate securities from individuals, charities and other businesses that purchased the securities even if those customers have since moved accounts.

They also must work to provide liquidity solutions for institutional investors and other customers. In addition, they must pay eligible customers who sold their auction-rate securities below par the difference between the sale price and par.

New York Attorney General Andrew Cuomo's office finalized deals with Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS). In total, 11 firms that the office has reached agreement with have bought back $61 billion of ARS from investors. Citigroup Inc. and UBS AG in December finalized their deals with both the SEC and Cuomo's office. All the companies still need to provide liquidity to the ARS market.

source: The Wall Street Journal

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By Deborah Lynn Blumberg
Of DOW JONES NEWSWIRES


SHERIDAN, Wyo. (Dow Jones)--Withdrawing the help that it has extended to the economy and financial markets will be tricky for the Federal Reserve, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Wednesday, but it must be done as the economy begins to recover in order to stem inflation.

The Fed has doubled its balance sheet to help markets. It can't wait until inflation begins to become an issue before it acts, though, and needs to try to "pull the stimulus out at the right time," Hoenig said.

That will be a "very delicate matter," said Hoenig. If the Fed pulls its help too quickly, it could trip the U.S. economy back into a recession, he said. Failure to pull help away fast enough, though, risks causing inflation, he said.

When it does begin to pull back, the Fed will need to raise excess reserves and begin to dispose of the assets it purchased. The latter, though, does put downward pressure on prices and "people become annoyed," he said.

In that light, it is key to "withdraw carefully and systematically. It's a matter of judgment and timing, but it has to be done. It won't be easy."

Hoenig was responding to questions from the audience after delivering prepared remarks at a lunch meeting in Sheridan, Wyo.

In response to other questions, the central banker also said the financial system needs a clear set of disciplinary rules to keep it from falling into another crisis in the future.

"We really do need to diagnose this correctly," he said. "We did get away from some very fundamental standards."

However, a complete regulatory restructuring isn't the way to go, he said, pointing instead to developing a clear set of rules that are "a disciplinary force on the industry."

For example, he cited setting firm principles for examiners who audit the banks. A reasonable leveraged standard or reasonable loan ratios are examples of such principles, he said. Banks that exceed a reasonable figure that was set would have to correct the imbalance. Hoenig also said banks with securities off their balances sheet could perhaps be required to retain a portion of that.

He also said commercial real estate is a sharp issue, noting that some of the financing of commercial real estate was done at very low rates.

In commercial real estate, "there are serious adjustments that are taking place," he said, adding also that the adjustment period will last for a period of time.

Discussions are ongoing related to the government's Public Private Investment Program, which was designed to remove troubled assets from bank balance sheets, Hoenig said.

The U.S. will have to think about how to bring balance back to its economy, how to save more as a nation and how to build up productivity, the central banker noted.

"This will take time," he said, "but the only way to get it solved is to begin solving it."

source: The Wall Street Journal

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By Dinah Wisenberg Brin
Of DOW JONES NEWSWIRES


Aetna Inc.'s (AET) lowering of its 2009 earnings forecast has raised questions about whether the pressures that hobbled its managed-care peers a year ago - and caused them to repeatedly cut their guidance - are finally catching up with the Hartford, Conn., company.

The news has left some wondering if Aetna isn't done reducing its outlook amid lingering concerns that the company has priced its commercial plans too low relative to medical costs.

"We are concerned that industrywide margin pressure that hit most of the sector in 2008 has caught up with Aetna in 2009," Wachovia analyst Matt Perry said in downgrading the company to market perform.

Perry added that last year the average reduction in projected per-share earnings was 34% and that most companies cut their views more than once. Aetna on Tuesday lowered the midpoint of its per-share earnings guidance, given in February, by 7%.

"Both of these data points leave us concerned that [Aetna] could cut EPS again in 2009," the analyst said. Goldman Sachs analyst Matthew Borsch, who has rated Aetna at sell for the past year and also sees further forecast cuts as a possibility, blames aggressive pricing.

"We continue to see pricing as the chief culprit here," he said. "We argue the red flags for lower earnings have been evident for some time as Aetna maintained its view of cycle-peak margins in the face of industrywide deterioration last year and as Aetna has continued to show strong sector-relative market share gains in the price-sensitive commercial risk segment."

Aetna maintains it aims to price its health plans in line with increases in medical costs and will continue to do so.

"The tradeoff between growth and profitability is not one that we're willing to make," Chief Financial Officer Joseph Zubretesky said on a conference call. "If we have to sacrifice membership growth for [next year] in order to price to our new medical [cost] trend, we will do that."

Aetna late Tuesday reduced its outlook for per-share operating earnings to between $3.55 and $3.70, from a previous range of $3.85 to $3.95, citing ongoing increases in medical costs in its commercial health plans and lower-than-expected Medicare revenue.

The company said it is continuing to see a higher level and number of services applied on a per-patient basis at hospitals, linking the phenomenon to the weak economy.

Wachovia's Perry said Aetna had the weakest results in the first quarter of this year and was the only company to cite unexpectedly high medical costs, while last year it was the only company not to significantly lower guidance and had higher margins than its peers.

For most of 2008, Aetna maintained its earnings forecast and expanded its lucrative commercial health-plan enrollment as its managed-care competitors struggled with pricing, medical costs, membership and profits.

Since then, Aetna's peers have tried to correct their pricing in response to their margin troubles last year. As a result, Borsch - like others - sees Aetna's current commercial margin pressure as company-specific.

Meanwhile, Citigroup's Charles Boorady believes the managed-care industry as a whole is indeed facing higher cost increases as providers seek to offset effects of the weak economy, but that Aetna is less reserved for it than its peers.

These concerns are reflected in Aetna's stock price. Aetna shares recently traded at $25.90, down 5% Wednesday, and is the only one of the top four managed-care companies showing a decline in its stock price year to date.

A year ago, the stock traded at a premium to its peer group, as measured in price to earnings for the next 12 months, although on average Aetna has traded in the middle of the pack for the past five-plus years.

Now, Aetna trades at roughly seven times projected earnings, a discount to larger competitors UnitedHealth Group Inc. (UNH) and WellPoint Inc. (WLP), which trade at more than eight times, although still a premium to Cigna Corp. (CI), the fourth-largest player, which trades at 5.8 times.

Overall, Borsch sees 2009 as marking a pause in an industry margin down cycle, although the sector is unlikely to outperform the market from here.

source: The Wall Street Journal

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By JESSICA E. VASCELLARO and JUSTIN SCHECK

The Justice Department is investigating whether a number of large U.S. companies violated antitrust laws by establishing agreements not to recruit each other's employees, according to people briefed on the investigation.

Members of the department have sought information from companies in the technology and biotechnology sectors, including Google Inc., Apple Inc., Yahoo Inc. and Microsoft Corp., these people said, adding the inquiry appears to be in an early stage. It is unclear which of the companies may be targets of the investigation.

A Google spokesman confirmed the company has been contacted about the investigation and is cooperating. A spokeswoman for Yahoo declined comment. An Apple spokesman couldn't immediately be reached.

A Justice Department spokeswoman declined comment.

The inquiry, reported earlier by the Washington Post, is the latest sign that the Obama administration is living up to its promise to enforce antitrust laws more aggressively. And it is further evidence that it intends to keep tech companies, in particular, in its sights.

The DOJ continues to investigate whether Google's proposed settlement with authors and publishers to resolve a copyright dispute over its book search service violates antitrust laws, according to people familiar with the matter. And the Federal Trade Commission has inquired about whether the fact that two directors--Google Chief Executive Eric Schmidt and former Genentech Inc. CEO Art Levinson--sit on both the Apple and Google board violates antitrust laws.

The latest investigation casts a wider net, looking at the hiring practices of companies in multiple industries, say people familiar with the inquiry.

Businesses frequently agree not to poach each other's employees as part of business deals or merger agreements and those pacts don't appear to violate antitrust laws, according to one person familiar with the investigation. Instead, the Justice Department is looking into whether companies establish blanket agreements not to do so, which may be considered collusion, this person said.

source: The Wall Street journal

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By Daniel Taub

A growing number of U.S. homeowners owe more than their properties are worth after prices extended their two-year decline in the first quarter, Zillow.com said.

Almost 21.8 percent of all owners were underwater as of March 31, the Seattle-based real estate data service said in a report today. At the end of the fourth quarter, 17.6 percent of homeowners owed more than their original mortgage, while 14.3 percent had negative equity three months earlier.

Property values dropped 14 percent from a year earlier in the first quarter, reducing the median value of all U.S. single- family homes, condominiums and cooperatives to $182,378, Zillow said. The gain in underwater homeowners will lead to more bank repossessions, the company said.

Many owners “would be more willing to bear the financial consequences of bankruptcy or foreclosure,” Stan Humphries, Zillow’s vice president of data and analytics, said in an interview. “You are going to continue to see home prices fall for the rest of this year and some portion of next year.”

The recession cut home values by $2.4 trillion last year, First American CoreLogic said in a March 4 report. More than 8.3 million U.S. mortgage holders owed more than their properties were worth and an additional 2.2 million borrowers will be underwater if prices decline another 5 percent, the Santa Ana, California-based seller of mortgage and economic data, said in the report.

Unemployment Rising

The data demonstrates the challenges facing Federal Reserve Chairman Ben S. Bernanke and the Obama administration as they seek to spark a housing recovery. The Fed has pushed 30-year fixed home loan rates to a record low by purchasing mortgage- backed securities. The jobless rate jumped to 8.9 percent last month from 8.5 percent in March and employers cut at least 600,000 workers from payrolls for a fifth straight time, according to the median estimate in a Bloomberg News survey ahead of a May 8 Labor Department report.

The U.S. market with the biggest drop in home values in the first quarter was Salinas, California, where the median price fell 37 percent to $301,793 from year earlier, Zillow said.

About 32 percent of all homes there were worth less than what’s owed on them, Zillow said. Among the worst-performing markets, Salinas was followed by Redding, Stockton, Madera, and Vallejo-Fairfield, all in California. The company estimates values for homes, whether or not they are sold in the period tracked, in 161 metropolitan areas.

Foreclosures Dominate

In 85 of the markets tracked, the annualized home-value change over the past five years was negative or little changed. About 20 percent of all home transactions in the past 12 months were foreclosures, and short sales made up about 12 percent. A short sale is when a home is sold for less than the outstanding mortgage balance.

The data for Zillow’s study dates to 1996 and comes from public records, the closely held company said. Its mortgage figures come from information filed with individual counties.

The decline in values is holding potential sellers back from putting their properties on the market, the company said. In a separate survey of homeowner sentiment, 31 percent of homeowners said they would be at least “somewhat likely” to put their property up for sale in the next 12 months should they see signs of a recovery.

source: Bloomberg

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of free enterprise on which our country was built. According to the editorial, the facts often do not support the claim that President Obama's proposed changes to the estate tax would hurt small businesses.

Nearly 60 percent of small-business owners do not believe that Mr. Obama's administration understands what they need. According to a survey conducted last month by City Business Journals Network, 40 percent of small- business owners are less optimistic about the economy than they were when the president took office.

Raising taxes on small businesses is a bad plan; it is reckless and threatens to make a bad economy worse. Data from the National Federation of Independent Business affirm that as many as 9 percent of businesses will be hit by increased taxes. Most important, these businesses are the job creators for our nation, generating approximately seven of every 10 new jobs in America. Tax hikes will therefore kill any chance for job growth. The president likes to refer to small businesses as the backbone of the American economy. He should throw them a bone instead of fetching them a higher tax bill.
Small-business owners, do not be led astray: Plan for Mr. Obama's tax changes to take a bigger bite of your revenue and put you in the doghouse.

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Pine View High School students Caitlin Trani, Nick Basset and Braedon Porter attended the Future Business Leaders of America state competition and placed second in two categories, Global Business and Entrepreneurship. Their high placement qualifies them to compete at FBLA's National Leadership Conference in Anaheim, Calif., in June.

Competitions require students to take a written exam as a prequalifier to advance to a final round, where students are given a simulated business situation. Student teams must present their recommendations for solving the problem to a panel of judges, who then determines a winner.

Trani and Basset teamed up to win the entrepreneurship competition by providing winning advice to increase revenues for owners of a coffee shop. Porter joined the duo in the global business category, where the team of three students proved its knowledge of expanding a business' global market. Classmate Kelcie Dean placed second in business communications and will be attending nationals with them.

"To place in the top 10 is, in itself, an honor and includes the most outstanding students in the state. In each event, students compete against hundreds of others for an opportunity to represent Utah on the national stage. Pine View's students showed their broad comprehension of business concepts in more than one event, and I'm confident they'll do well competing against the top in the nation," said Dianna Moore, FBLA advisor.

This will be Trani's second time traveling to California for academic achievement, having won first place in accounting at the DECA state competition in March.

DECA, the national association of marketing students, holds it's international competition later this month, and Trani will be the only student who qualified from Washington County School District to attend the event. Trani has been a member of both FBLA and DECA business clubs for four years and has served as the FBLA president this year. Trani, along with a select group of outstanding seniors, will graduate from Pine View's elite School of Business program in May. Pine View High boasts the largest business program in the district, offering students the ability to graduate with a strong portfolio and a business major.

"We have a vision of what we would like our Pine View students to become and to achieve," remarks principal Mike Mees. "Caitlin Trani is a perfect example of that vision."

With current budget constraints, Trani and her peers will be required to pay the majority of their travel expenses to compete at the national level. The competitions cost each student about $600 out of their own pockets.

source :The spektrum.com

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By Jeff Gelles

If credit-card companies ever seem like they're playing a cat-and-mouse game with your credit limits or interest rates, remember the perspective of the mouse - to whom it can be a very costly game.

Consider the case of Marc Crawford, of Philadelphia's Mayfair section. Crawford says he rarely used his HSBC MasterCard, which had a credit limit of $9,200. But after he splurged on $1,500 worth of Christmas gifts for a new grandbaby, he found his credit limit had been cut to $2,500 - a change that could hurt his credit score.

Or consider what happened to Roxanne Reitmeyer, of Ardmore, who has two Bank of America credit cards with interest rates under 10 percent. Last week, Bank of America notified her that the rates on each card would rise next month, essentially doubling her monthly interest costs.

Both kinds of changes are happening with rising frequency. Bank of America, for instance, acknowledged last week that it was raising rates on four million U.S. cardholders with characteristics similar to Reitmeyer's: They carry a balance, and have rates under 10 percent.

Card issuers say they're simply managing credit-card accounts more conservatively in light of the nation's economic distress, which has forced them to write off more credit-card debt and raised their costs of funds.

Bank of America spokeswoman Betty Riess says the four million cards represent fewer than 10 percent of the bank's U.S. cardholders. She says the bank is raising prices on cardholders whose cards are "underpriced relative to current market conditions."

Consumer advocates have a more skeptical view of lenders' recent changes. They believe financially stressed banks are trying to squeeze more profits from a relatively healthy segment of their businesses.

A case in point: Until it backed down last month under pressure from the New York Attorney General's Office, JPMorgan Chase & Co. had sought to impose a brand-new $10 monthly service fee on more than 300,000 cardholders. Chase agreed to refund $4.4 million.

For consumers facing any change in credit limits or terms, the most important thing is to understand what's happening and the choices you have in response. If you're already feeling financial stress, any changes in terms can make a bad situation worse.

Crawford had few options beyond the one he took: complaining to HSBC and to its federal regulator, the Comptroller of the Currency.

It's not clear what the comptroller can do. Credit cards are are open-ended extensions of credit, and banks say they need to respond swiftly to signs of increased risk. No advance notice is required.

Still, Crawford's complaints got some traction. Last month, HSBC bumped his limit up to $5,000.

Crawford was right to be concerned about his credit score, says Linda Sherry of the California group Consumer Action. She says the key worry is a "domino effect": Lower credit scores can prompt lenders to raise cardholders' interest rates, which in turn can boost balances and expose consumers to over-limit fees and penalty interest rates.

Sherry believes lenders should at least be required to notify cardholders of reductions in credit limits - as new federal rules will require next year in some circumstances. Crawford discovered his limit had changed when he went online to pay his February bill.

"It's a key term - along with interest rates, it's the term that matters most to people," Sherry says.

If they can't afford higher interest payments, Bank of America cardholders such as Reitmeyer face similar risks, but have another option: They can formally decline the change in terms - if they're willing and able to close their accounts.

That doesn't mean they must immediately pay off their balances. They simply have to continue to meet the terms of the old agreement and make timely payments.

But it does mean that they can't use their cards, because making additional charges constitutes "acceptance" of the new rates.

That seems fair enough. If you have an account you're closing to reject changed terms, the best thing to do is cut up the card, or tuck it in a drawer.

But there's a trap that snares many consumers: unintentional charges, such as recurring fees for online services or magazine subscriptions. If you use your card for such payments, make sure you provide another card or request a different payment method. Accidental or not, credit-card banks will treat any subsequent use as an excuse to reactivate the account at the higher rates - another trap that will disappear when new rules take effect in July 2010.

At that point, or perhaps sooner if Congress intervenes, cardholders won't face such stark choices. For instance, lenders won't be able to change rates on existing balances if cardholders are current with payments.

But for now, stressed consumers are being buffeted by unfriendly market conditions - including less opportunity to take the time-honored step of taking their business elsewhere.If credit-card companies ever seem like they're playing a cat-and-mouse game with your credit limits or interest rates, remember the perspective of the mouse - to whom it can be a very costly game.

Consider the case of Marc Crawford, of Philadelphia's Mayfair section. Crawford says he rarely used his HSBC MasterCard, which had a credit limit of $9,200. But after he splurged on $1,500 worth of Christmas gifts for a new grandbaby, he found his credit limit had been cut to $2,500 - a change that could hurt his credit score.

Or consider what happened to Roxanne Reitmeyer, of Ardmore, who has two Bank of America credit cards with interest rates under 10 percent. Last week, Bank of America notified her that the rates on each card would rise next month, essentially doubling her monthly interest costs.

Both kinds of changes are happening with rising frequency. Bank of America, for instance, acknowledged last week that it was raising rates on four million U.S. cardholders with characteristics similar to Reitmeyer's: They carry a balance, and have rates under 10 percent.

Card issuers say they're simply managing credit-card accounts more conservatively in light of the nation's economic distress, which has forced them to write off more credit-card debt and raised their costs of funds.

Bank of America spokeswoman Betty Riess says the four million cards represent fewer than 10 percent of the bank's U.S. cardholders. She says the bank is raising prices on cardholders whose cards are "underpriced relative to current market conditions."

Consumer advocates have a more skeptical view of lenders' recent changes. They believe financially stressed banks are trying to squeeze more profits from a relatively healthy segment of their businesses.

A case in point: Until it backed down last month under pressure from the New York Attorney General's Office, JPMorgan Chase & Co. had sought to impose a brand-new $10 monthly service fee on more than 300,000 cardholders. Chase agreed to refund $4.4 million.

For consumers facing any change in credit limits or terms, the most important thing is to understand what's happening and the choices you have in response. If you're already feeling financial stress, any changes in terms can make a bad situation worse.

Crawford had few options beyond the one he took: complaining to HSBC and to its federal regulator, the Comptroller of the Currency.

It's not clear what the comptroller can do. Credit cards are are open-ended extensions of credit, and banks say they need to respond swiftly to signs of increased risk. No advance notice is required.

Still, Crawford's complaints got some traction. Last month, HSBC bumped his limit up to $5,000.

Crawford was right to be concerned about his credit score, says Linda Sherry of the California group Consumer Action. She says the key worry is a "domino effect": Lower credit scores can prompt lenders to raise cardholders' interest rates, which in turn can boost balances and expose consumers to over-limit fees and penalty interest rates.

Sherry believes lenders should at least be required to notify cardholders of reductions in credit limits - as new federal rules will require next year in some circumstances. Crawford discovered his limit had changed when he went online to pay his February bill.

"It's a key term - along with interest rates, it's the term that matters most to people," Sherry says.

If they can't afford higher interest payments, Bank of America cardholders such as Reitmeyer face similar risks, but have another option: They can formally decline the change in terms - if they're willing and able to close their accounts.

That doesn't mean they must immediately pay off their balances. They simply have to continue to meet the terms of the old agreement and make timely payments.

But it does mean that they can't use their cards, because making additional charges constitutes "acceptance" of the new rates.

That seems fair enough. If you have an account you're closing to reject changed terms, the best thing to do is cut up the card, or tuck it in a drawer.

But there's a trap that snares many consumers: unintentional charges, such as recurring fees for online services or magazine subscriptions. If you use your card for such payments, make sure you provide another card or request a different payment method. Accidental or not, credit-card banks will treat any subsequent use as an excuse to reactivate the account at the higher rates - another trap that will disappear when new rules take effect in July 2010.

At that point, or perhaps sooner if Congress intervenes, cardholders won't face such stark choices. For instance, lenders won't be able to change rates on existing balances if cardholders are current with payments.

But for now, stressed consumers are being buffeted by unfriendly market conditions - including less opportunity to take the time-honored step of taking their business elsewhere.If credit-card companies ever seem like they're playing a cat-and-mouse game with your credit limits or interest rates, remember the perspective of the mouse - to whom it can be a very costly game.

Consider the case of Marc Crawford, of Philadelphia's Mayfair section. Crawford says he rarely used his HSBC MasterCard, which had a credit limit of $9,200. But after he splurged on $1,500 worth of Christmas gifts for a new grandbaby, he found his credit limit had been cut to $2,500 - a change that could hurt his credit score.

Or consider what happened to Roxanne Reitmeyer, of Ardmore, who has two Bank of America credit cards with interest rates under 10 percent. Last week, Bank of America notified her that the rates on each card would rise next month, essentially doubling her monthly interest costs.

Both kinds of changes are happening with rising frequency. Bank of America, for instance, acknowledged last week that it was raising rates on four million U.S. cardholders with characteristics similar to Reitmeyer's: They carry a balance, and have rates under 10 percent.

Card issuers say they're simply managing credit-card accounts more conservatively in light of the nation's economic distress, which has forced them to write off more credit-card debt and raised their costs of funds.

Bank of America spokeswoman Betty Riess says the four million cards represent fewer than 10 percent of the bank's U.S. cardholders. She says the bank is raising prices on cardholders whose cards are "underpriced relative to current market conditions."

Consumer advocates have a more skeptical view of lenders' recent changes. They believe financially stressed banks are trying to squeeze more profits from a relatively healthy segment of their businesses.

A case in point: Until it backed down last month under pressure from the New York Attorney General's Office, JPMorgan Chase & Co. had sought to impose a brand-new $10 monthly service fee on more than 300,000 cardholders. Chase agreed to refund $4.4 million.

For consumers facing any change in credit limits or terms, the most important thing is to understand what's happening and the choices you have in response. If you're already feeling financial stress, any changes in terms can make a bad situation worse.

Crawford had few options beyond the one he took: complaining to HSBC and to its federal regulator, the Comptroller of the Currency.

It's not clear what the comptroller can do. Credit cards are are open-ended extensions of credit, and banks say they need to respond swiftly to signs of increased risk. No advance notice is required.

Still, Crawford's complaints got some traction. Last month, HSBC bumped his limit up to $5,000.

Crawford was right to be concerned about his credit score, says Linda Sherry of the California group Consumer Action. She says the key worry is a "domino effect": Lower credit scores can prompt lenders to raise cardholders' interest rates, which in turn can boost balances and expose consumers to over-limit fees and penalty interest rates.

Sherry believes lenders should at least be required to notify cardholders of reductions in credit limits - as new federal rules will require next year in some circumstances. Crawford discovered his limit had changed when he went online to pay his February bill.

"It's a key term - along with interest rates, it's the term that matters most to people," Sherry says.

If they can't afford higher interest payments, Bank of America cardholders such as Reitmeyer face similar risks, but have another option: They can formally decline the change in terms - if they're willing and able to close their accounts.

That doesn't mean they must immediately pay off their balances. They simply have to continue to meet the terms of the old agreement and make timely payments.

But it does mean that they can't use their cards, because making additional charges constitutes "acceptance" of the new rates.

That seems fair enough. If you have an account you're closing to reject changed terms, the best thing to do is cut up the card, or tuck it in a drawer.

But there's a trap that snares many consumers: unintentional charges, such as recurring fees for online services or magazine subscriptions. If you use your card for such payments, make sure you provide another card or request a different payment method. Accidental or not, credit-card banks will treat any subsequent use as an excuse to reactivate the account at the higher rates - another trap that will disappear when new rules take effect in July 2010.

At that point, or perhaps sooner if Congress intervenes, cardholders won't face such stark choices. For instance, lenders won't be able to change rates on existing balances if cardholders are current with payments.

But for now, stressed consumers are being buffeted by unfriendly market conditions - including less opportunity to take the time-honored step of taking their business elsewhere.Consumers can shop online for credit cards at sites such as www.LowCards.com. But those who rely on solicitations from card issuers, which topped 5 billion in 2007, are likely seeing fewer offers.lern more BestCredit: How to Win the Credit Game, 2nd Edition


source :Pilly.com

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By Dan Eggen

In a remarkable illustration of the power of lobbying in Washington, a study released last week found that a single tax break in 2004 earned companies $220 for every dollar they spent on the issue -- a 22,000 percent rate of return on their investment.

The study by researchers at the University of Kansas underscores the central reason that lobbying has become a $3 billion-a-year industry in Washington: It pays. The $787 billion stimulus act and major spending proposals have ratcheted up the lobbying frenzy further this year, even as President Obama and public-interest groups press for sharper restrictions on the practice.

The paper by three Kansas professors examined the impact of a one-time tax break approved by Congress in 2004 that allowed multinational corporations to "repatriate" profits earned overseas, effectively reducing their tax rate on the money from 35 percent to 5.25 percent. More than 800 companies took advantage of the legislation, saving an estimated $100 billion in the process, according to the study.

The largest recipients of tax breaks were concentrated in the pharmaceutical and technology fields, including Pfizer, Merck, Hewlett Packard, Johnson & Johnson and IBM. Pfizer alone repatriated $37 billion, representing 70 percent of its revenue in 2004, the study found. The now-beleaguered financial industry also benefited from the provision, including Citigroup, J.P. Morgan Chase, Morgan Stanley and Merrill Lynch, all of which have since received tens of billions of dollars in federal bailout money.

The researchers calculated an average rate of return of 22,000 percent for those companies that helped lobby for the tax break. Eli Lilly, for example, reported in disclosure documents that it spent $8.5 million in 2003 and 2004 to lobby for the provision -- and eventually gained tax savings of more than $2 billion.

"There's always been speculation that lobbying is a lucrative area," said Stephen W. Mazza, a Kansas tax-law professor who is one of the authors of the study. "We've been able to come up with quantifiable returns and show that it really is the case."

Mazza added that the results are "troubling" because they show how large companies can distort tax policy to benefit their bottom line.

Obama has made lobbying a key target of his ethics policies, sharply limiting the access of lobbyists to the administration and forbidding the appointment of many former lobbyists in the government without special waivers. The moves have angered many lobbying groups but have had little apparent impact on the ongoing boom in K Street business.

"It's always hard to measure the financial benefits of lobbying, but generally everyone knows it does bring in a lot," said Craig Holman, government affairs lobbyist for Public Citizen. "That's why corporations are pouring more and more money into lobbying every year. Clearly, they understand it has a very good rate of return."

The tax break in question was included as part of the American Jobs Creation Act of 2004, and was billed as a way to create jobs in the United States by requiring companies to use the money for specific purposes.

But the Congressional Research Service and others have since found that many companies cut jobs in the wake of the tax break and that nearly all the money was used for stock buybacks or dividends. Supporters failed in a bid to include a similar tax break in this year's stimulus legislation, and a Senate subcommittee has launched an investigation into how companies used their tax savings under the 2004 program.

The provision was championed in part by the Homeland Investment Coalition, a group of companies and trade associations that was formed to push for the repatriation holiday. The Pharmaceutical Research and Manufacturers of America (PhRMA), one of the disbanded coalition's members, said in a statement Friday that "repatriation of profits provided a new source of investment for American companies."

"PhRMA supported the legislation four years ago as part of a broad business coalition because of the additional economic benefits the bill would provide," senior vice president Ken Johnson said. "It meant jobs and skilled training for American workers, as well as a shot in the arm for local economies."

source:The Washigton Post

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By Shobhana Chandra

The number of Americans seeking jobless benefits last week climbed to the highest level in 26 years, providing a reminder that unemployment will keep mounting long after the economy stabilizes.

Initial jobless claims swelled by 12,000 to 669,000 in the week ended March 28, the most since 1982, the Labor Department said today in Washington. A Commerce Department report showed orders to factories improved in February for the first time in seven months.

Attention now turns to tomorrow’s monthly employment report that is projected to show the jobless rate climbed in March to a 25-year high. The biggest slump in profits in five decades means companies will cut more staff to reduce expenses in coming months, even as orders begin to trickle in.

“There are positive signs in the economy, solid signs that the downdraft has diminished,” said Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “But because the labor market lags, we don’t think we’ve seen the worst of that yet.”

Stocks gained, extending a global rally, as investors welcomed a change in regulation that may boost bank profits, and leaders of the most powerful nations, meeting in London, neared agreement on joint efforts to stem the recession. The Standard & Poor’s 500 index was up 3.8 percent to 841.86 at 11:19 a.m. in New York. Treasury securities fell and oil jumped.

First-time jobless claims were estimated to fall to 650,000 from 652,000 initially reported for the prior week, according to the median projection of 43 economists in a Bloomberg News survey. Estimates ranged from 630,000 to 682,000.

Job Cuts

The report from Labor also showed the total number of people collecting benefits soared in the week ended March 21 to a record 5.73 million. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, increased to 4.3 percent in the same week, the highest since 1983.

The jobless rate last month climbed to 8.5 percent, the highest level since 1983, according to the median forecast in a Bloomberg survey before tomorrow’s report. Payrolls probably fell by 660,000 workers, bringing total job losses since the downturn began to about 5 million.

Less employment and slowing incomes may thwart a rebound in consumer spending, setting back prospects for an economic turnaround in the second half of 2009.

“It is difficult to sustain any rebound in consumer spending when you have such sharp declines in employment,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “It’s getting harder to get a job once you lose it.”

Factory Orders

Orders placed with factories rose 1.8 percent in February, the first gain since July, reflecting a rebound in demand for construction machinery, computers and air-conditioning equipment that signals the worst of the manufacturing slump has passed.

The gain followed a 3.5 percent drop in January that was larger than previously estimated, the Commerce Department said.

A pickup in bookings, combined with plunging stockpiles, is setting the stage for gains in output in coming months that may stem the slide in factory employment.

“There are signs that the pace of decline in manufacturing activity may be slowing,” said Tim Quinlan, economic analyst a Wachovia Corp. in Charlotte, North Carolina.

The Commerce report showed demand for motor vehicles and parts rose 1.1 percent in February, and improving sales indicate gains may continue.

Auto Purchases

Auto purchases last month were stronger than forecast, rising to a 9.9 million annual pace from a three-decade low of 9.1 million in February, according to industry figures released yesterday. Carmakers were forced to spend a record $3,169 on incentives per vehicle on average, surpassing the previous mark set in September 2004, to entice consumers.

“It’s one month in a row, and it’s of interest and there may be a small sign of hope,” Chrysler LLC President Jim Press said on a call with reporters yesterday. “But if you look at the trends out there, there’s a lot of concern.”

President Barack Obama earlier this week gave General Motors Corp. and Chrysler deadlines to “fundamentally restructure” or lose government aid that has kept them running. He rejected the companies’ recovery plans and forced GM Chief Executive Officer Rick Wagoner to resign.

In addition to providing funds to the U.S. automakers, policy makers are trying to unclog credit. The Financial Accounting Standards Board voted today to relax fair-value rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive.

The changes allow companies to use “significant” judgment when gauging the price of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ writedowns and boost their first-quarter net income by 20 percent or more.

source :Bloomberg

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By Greg Morcroft & John Spence

While he's seeing "mixed signals," Bank of America Corp.'s chief executive says he expects the U.S. economy to bottom in the second half of this year, and he doesn't anticipate the government to ask the company to raise more capital.
In a wide-ranging TV interview on CNBC, CEO Ken Lewis -- who spearheaded Bank of America's controversial acquisitions of Countrywide Financial and Merrill Lynch at the height of the recent credit crisis -- also said that the Charlotte, N.C.-based company (BAC:7.38, +0.33, +4.7%) remains willing to
work with customers to avoid mortgage foreclosure and that tens of billions of dollars of the bank's capital remains tied up in reserves for losses on consumer loans such as mortgages and credit cards.

Regarding the government's recent investment in the company under the Troubled Asset Relief Program stabilization plan, Lewis said that he regretted taking a larger piece of government money than the company needed, adding that he's "anxious" to return at least some of those funds to the government.
Lewis said that the company is continuing to make "every good loan we can make," despite a continuing rise in consumer loan delinquencies.
He said that the next six months will be tough but that the current economic downturn is beginning to feel to him more like a typical recession than a freefall.
'Mixed signals'
Asked about the current state of the economy, Lewis said he sees mixed indications with some housing sales data coming in better than expected, and some auto sales not quite as bad as forecasted.
"When you see mixed signals, I think it signals that you're getting close to the bottom," the chief executive told CNBC.
He said he shares the consensus view that can have things moderate in terms of the declines and that the economy hits bottom in the second half 2009, with a recovery in the first part of next year.
"You can't throw as many things as we're throwing at it and not break the back of this thing," Lewis said.
He said the recent wave of mortgage refinancing will reduce monthly payments for many borrowers and help kick-start the economy.
Lewis said Bank of America is working on modifying home loans for strapped borrowers.
"Nobody wants to foreclose," he said. "It's bad for everybody, and it's particularly devastating for communities."
TARP regrets
Lewis said he erred by taking the second round of TARP capital from the government when it was closing the controversial acquisition of Merrill Lynch.
B. of A. took another $20 billion after earlier accepting $25 billion.
"That was my mistake," he said. "We took more than we needed. I regret having taken that much. That's why I'm so anxious to pay at least some of it back."
Lewis explained he didn't take the second capital infusion solely because of Merrill Lynch, but also to protect the bank from the economy worsening more than it actually did. He said the government didn't force the company to complete the Merrill Lynch deal, and that it was "the right thing to do" for both B. of A. and the American financial system. Lewis lauded the Merrill acquisition, saying the brokers have more banking products to sell now.
He said the purchases of Merrill and mortgage giant Countrywide "will prove to be two of the best acquisitions we've ever made if you judge us over two or three years, rather than two or three months."
'Earnings power'
When asked about B. of A. shares still trading below $8, the CEO said the stock price reflects "fear of the unknown," as well as questions over the economy and further write-downs.
"This is going to be a tough year for all institutions," Lewis said.
Yet a year from now, "we'll be coming out of this, and you'll be able to see a lot of the earnings power of the financial institutions and the unemployment rate should at least be holding steady if not starting to improve slightly."
Lewis is also optimistic the bank will pass the so-called stress tests being conducted by the government.
"The bad news is it creates a lot of uncertainty," he remarked. "The good news is we will get through it now and hopefully get that uncertainty behind us and get some closure."
He said he doesn't expect the government will ask B. of A. to raise additional capital.
Finally, he acknowledged the compensation system in the banking business is changing during the financial crisis. He expects salaries will represent a greater percentage of overall compensation relative to incentives, which can encourage too much risk-taking.Lords of Finance: The Bankers Who Broke the World


source :MArketWatch

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By Michael R. Crittenden

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- American International Group Inc.'s (AIG) former chairman blamed the executives who replaced him for the company's collapse, refusing to accept any responsibility despite coming under fire from lawmakers on his role in fostering the firm's financial products division.

"I think they got greedy. I think they wrote considerably more business than they should have," Maurice Greenberg told the House Oversight and Government Reform Committee Thursday.

Greenberg, who headed AIG for 38 years before departing under pressure in 2005, said the U.S. government's effort to prop up the firm - to the tune of $ 170 billion in government aid - has "failed" and that the company should be restructured. Liquidating the firm and selling off its assets should be abandoned, he said, and the government should reduce its stake in the firm from 80% to 15%.

"My approach focuses on reconstructing and sustaining AIG so that it will in the future be a healthy and vibrant company once again," Greenberg said in his testimony before the House Oversight and Government Reform committee.

Added Greenberg: "Let me be clear: AIG's business model did not fail - its management did."

Lawmakers wanted more from Greenberg, pressing him on his ongoing litigation with AIG and what role he played in fostering AIG's financial products division, the unit that wrote vast amounts of credit-default swap contracts that ended up forcing the government's rescue of the firm.

"Mr. Greenberg's testimony should be taken with a grain of salt," Rep. Darrell Issa, R-Calif., said. "At the very least, we must acknowledge these biases."

Rep. Elijah Cummings, D-Md., was more direct, asking Greenberg during a heated exchange, "Do you take any responsibility at all?"

Greenberg, accompanied by high profile attorney David Boies, refused to accept any blame.

"No I don't," Greenberg said, referring to subsequent losses at the financial products division and downgrades of AIG's ratings. He said the management that took over when he left the firm "must have paid very little attention" to the growing problems that led to the firm's demise.

Additionally, Greenberg said billions in government funds should not have been paid to AIG's counterparties; giving other financial firms guarantees would've been a better option.

"These cash payments to [credit-default swap] counterparties should never have occurred," Greenberg said. "It would have been more beneficial for the American taxpayer if the federal government had walled off AIG Financial Products ... and provided guarantees to AIGFP's counterparties rather than putting up billions of dollars in cash collateral to those counterparties."

source :CNNmoney.com

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By SHERYL GAY STOLBERG and BIL VLASIC

President Obama announced what amounts to a do-or-die ultimatum for the struggling automobile industry on Monday, laying out strict standards that the carmakers must meet to get more government aid and declaring that the industry must survive because it is “like no other, an emblem of the American spirit.”A failure of leadership “from Washington to Detroit” over the years has led the industry to the brink of collapse, the president said, and in more recent days both General Motors and Chrysler have failed to come up with plans adequate to justify the billions more in government help that they are requesting.

“And so today, I am announcing that my administration will offer G.M. and Chrysler a limited period of time to work with creditors, unions and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars; a period during which they must produce plans that would give the American people confidence in their long-term prospects for success,” the president said at the White House.

Speaking a day after the White House pushed out the chairman of G.M., the president said Chrysler has been instructed to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid.

The president said he was designating Edward Montgomery, a former deputy labor secretary, to oversee the auto-recovery effort. His mission will be far-reaching, to cut through government red tape and identify initiatives to support those communities hit hard by the industry’s troubles.

Other salient features of the latest plan to pull Detroit out of its decades-long skid include a tax break, being started by the Internal Revenue Service at once, for auto purchases made between Feb. 16 and the end of 2009; incentives for people to turn in older, less fuel-efficient vehicles and buy more energy-efficient cars, and government-backed warrants to assure customers that they have nothing to fear by buying a car from G.M. or Chrysler.

While the president’s announcement embodies firm government control of the car industry, at least for the time being, he said, “These companies — and this industry — must ultimately stand on their own, not as wards of the state.”

Mr. Obama said his administration has been working closely with the Canadian government, which was to announce its own “specific commitments” later Monday. Both G.M. and Chrysler have extensive operations north of the border.

The concept of encouraging people to buy more fuel-efficient cars, which has been tried with considerable success in Europe, will require the cooperation of Congress. Mr. Obama said he would work with lawmakers to identify portions of the recently enacted multibillion-dollar stimulus package that could be trimmed to finance the purchase-incentive idea — and make it effective at once.

General Motors, in a statement released after the president’s comments, said that over the next 60 days, the company would try to “address the tough issues to improve the long-term viability of the company, including the restructuring of the financial obligations to the bond holders, unions and other stakeholders.”

“Our strong preference is to complete this restructuring out of court,” G.M. said. “However, G.M. will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.”

The president tried to project optimism as he summoned images of Detroit’s mighty past, even as he spoke of decades of complacency and problems left for another day “even as foreign competitors outpaced us.”

“Well, we have reached the end of that road,” he said. “And we, as a nation, cannot afford to shirk responsibility any longer.”

The president did not mention Ford, the other company in Detroit’s Big Three. While it has had problems, Ford has not yet found it necessary to seek government assistance.

The president envisioned an auto industry much different, almost surely smaller, and more nimble. Yet in doing so, and voicing confidence that the industry can travel that road, he recalled an earlier Detroit that “built an arsenal of democracy that propelled America to victory in the Second World War, and that powered our economic prowess in the first American century.”

The decision to ask G.M.’s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression.

“This is not meant as a condemnation of Mr. Wagoner, who has devoted his life to this company; rather, it’s a recognition that it will take a new vision and new direction to create the G.M. of the future,” the president said.

The report said the company would get no more help from the government unless it can finalize a proposed alliance with the Italian automaker Fiat by April 30. It must also reduce its debt and health-care obligations.

If a deal is reached between Chrysler and Fiat, the administration says it would consider another loan of $6 billion to Chrysler.

G.M., on the other hand, has made considerable progress in developing new energy-efficient cars and could survive if it can cut costs sharply, the task force reported. The administration is giving G.M. 60 days to present a cost-cutting plan and will provide taxpayer assistance to keep it afloat during that time.

Although some observers of the auto industry have attributed Detroit’s troubles in part to generous wages and health benefits for assembly line workers, the president made no mention of those factors. “The pain being felt in places that rely on our auto industry is not the fault of our workers, who labor tirelessly and desperately want to see their companies succeed,” he said. “And it is not the fault of all the families and communities that supported manufacturing plants throughout the generations.”

Rather, he said, there has been a failure of leadership.

Along with Mr. Wagoner’s ouster, the task force said most of the company’s board would be replaced over the next few months. In a statement Monday, Mr. Wagoner said he had been urged to “step aside” by administration officials, “and so I have.”

His resignation is the latest example of the government taking a hands-on role in making major decisions at companies it is bailing out. The government has already pushed banks to make management changes and sharply reduce or eliminate their dividends, and it also is directing many of the decisions at the troubled insurance giant American International Group, which is nearly 80 percent owned by the government after its rescue.

In deciding to urge Mr. Wagoner to step down, the Obama administration seemed mindful of the public’s growing outrage over bailouts of private companies, as well as the bonuses paid to employees of A.I.G.

Mr. Obama is well aware that he cannot afford to give the appearance of using tax dollars to reward executives who have done a poor job, and he began signaling as early as last week that he would take a tough stance with the automakers.

The plan Mr. Obama announced on Monday will also include government backing of warranties for G.M. and Chrysler cars and trucks, to give consumers enough confidence to buy them, even if one or both are forced into bankruptcy.

Mr. Wagoner has presided over a steep drop in G.M.’s domestic market share, which has led to tens of billions of dollars in losses. His critics have said that management’s failure to move aggressively to address the company’s problems contributed to its dire financial situation.

G.M. and Chrysler have almost exhausted the combined $17.4 billion in federal aid they have received since December. G.M. has asked for up to $16.6 billion more, and Chrysler has requested another $5 billion.

Bondholders are under pressure to convert two-thirds of the $27 billion owed them into G.M. stock, while the United Auto Workers union is being asked to substitute stock for 50 percent of their health care benefits for retirees. Both groups have resisted those changes.

Administration officials say they have enough money to offer the assistance they envision under plans already approved by Congress. Even so, Mr. Obama may face skepticism on Capitol Hill and from the public.

As part of the companies’ original agreement for the loans, both were required to submit restructuring plans. Mr. Wagoner’s removal underscores how much more G.M. needs to cut than was proposed in the plan the company submitted.

Administration officials stressed that the company needed a fresh approach and leadership changes; they said Steven Rattner, the former investment banker who co-chairs the auto task force, delivered the news to Mr. Wagoner.

Frederick A. Henderson, G.M.’s president, will succeed Mr. Wagoner on an interim basis as chief executive; Kent Kresa, a board member, will assume the chairmanship. Members of the auto panel spoke with Mr. Henderson recently and came away with a favorable impression of him, people familiar with the panel’s discussions said.

G.M. collapsed last fall when new-vehicle sales in the United States plummeted to their lowest level in 25 years. G.M. lost more than $30 billion in 2008, and has been subsisting on government loans since the beginning of the year.

source :The new york times

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By William L. Watts

The Associated Press said an estimated 35,000 persons marched to London's Hyde Park Saturday as part of the "Put People First" event organized by around 150 groups. The peaceful march was one of several demonstrations in European capitals over the weekend that organizers said was designed to demand G20 leaders focus on poverty, inequality and the threat posed by climate change.
And London will be the center of protests this week as anti-war, environmental, anti-globalization and other groups converge on the U.K. capital ahead of the G20 summit.
All police leave has been canceled. London's police forces have allocated 84,000 man hours to security for the G20 summit, according to the BBC.
The biggest events are expected on Wednesday, when thousands of demonstrators plan to block traffic and buildings in the City of London's, the capital's financial district, as part of an event dubbed "Financial Fools Day."
On Web postings, protest groups say they plan to lead processions from four Underground stations in the City, converging on the Bank of England at noon, local time.
Environmental protesters also plan a "Climate Camp" in the City on April 1. They plan to "swoop" in to create a camp in front of the European Climate Exchange at 12:30 p.m. London time to protest carbon trading.
"First the city traders speculated with our homes, jobs and money - with disastrous results," the Climate Camp group says on its Web site. "Now they are speculating with our climate and the very future of life on earth - and once again our governments are cheering them on."
An anti-war march and other protests are also slated for Wednesday, while various groups have also said they plan to march at the ExCel conference center in East London on Thursday during the G20 meeting.
A number of firms have urged staff to dress down during the week or to work from home, news reports said.
Meanwhile, City of London Police have urged banks and other businesses in the financial district to take a range of steps including canceling unnecessary meetings, canceling deliveries, keeping movement in and out of business premises to a minimum. Firms were also urged to "advise staff not to antagonize protestors and risk escalation in incidents," the police advisory said.

source :MarketWatch

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By Riva Froymovich


The euro fell to a one-and-a-half-week low against the dollar Monday morning as U.S. stocks declined amid fresh turmoil in the auto and financial sectors.

Risk appetite in the currency markets is also down ahead of Thursday's Group of 20 summit and European Central Bank meeting, with traders waiting to see the results.

Leaks of the draft G20 communique indicate there won't be a fresh round of coordinated stimulus spending coming from the April 2 summit, a cause for concern for the euro, whose monetary authorities have been unwilling to match U.S. efforts, according to strategists.

However, the euro was boosted very slightly from its lowest intraday levels on comments by ECB chief Jean-Claude Trichet Monday.

He told the European Parliament that the euro-zone economy has weakened since January and that there is "a high degree of uncertainty" surrounding the economic outlook. But, he said there are no significant risks for deflation and that the central bank will do what is needed to cope with the financial crisis.

Trichet also added that the central bank will achieve its medium-term objective, to keep inflation below but near 2%.

Monday morning in New York, the euro was at $1.3162 from a low of $1.3114 and from $1.3298 late Friday. The dollar was at Y96.99 from an overnight low of Y95.96 and from Y97.91 late Friday, according to EBS. The euro was at Y127.66, off a two-week low of Y126.43 Monday, and from Y130.20 Friday. The U.K. pound was at $1.4202 from $1.4286, and the dollar was at CHF1.1522 from CHF1.1438.

The Obama administration auto task force, after more than a month of analysis, suggested that the best chance for success for General Motors and Chrysler "may well require utilizing the bankruptcy code in a quick and surgical way." Using the threat of withholding more bailout money, the administration forced out General Motors Corp. Chief Executive Rick Wagoner.

The euro is under additional pressure after a monthly survey by the European Commission showed business and consumer confidence in the 16 countries that use the euro weakened to a record low in March as new orders continued to dry up and concerns about job losses mounted.

source :The Wall street journal

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SEATTLE: The Seattle Post-Intelligencer, which has chronicled the news of the city since logs slid down its steep streets to the harbor and miners caroused in its bars before heading north to Alaska's gold fields, will print its final edition Tuesday.

Seattle becomes the second major city to lose a newspaper this year, following Denver, as many U.S. dailies face uncertain futures, battered by quickly declining ad revenue in the age of the Internet and a teetering economy.

Hearst Corp., which owns the 146-year-old P-I, said Monday that it failed to find a buyer for the newspaper, which it put up for a 60-day sale in January after years of losing money.

The P-I's roots date to 1863, when Seattle was still a frontier town. It will now shift to another frontier for newspapers: entirely to the Web.

"Tonight will be the final run, so let's do it right," publisher Roger Oglesby told the newsroom.

The last print edition began rolling off the presses at a suburban printing plant shortly after 10 p.m. Monday. The front page featured a headline saying, "You've meant the world to us," and a photo of the 30-foot neon globe atop the P-I's building, which has a slogan rotating around the equator saying, "It's in the P-I."

The paper was to be delivered wrapped with 20 to 24 pages of photos and stories on the P-I's history.

Hearst's move to end the print edition leaves the P-I's larger rival, The Seattle Times, as the only mainstream daily in the city. The Times plans to deliver a copy of the newspaper to every P-I subscriber on Wednesday morning, spokeswoman Jill Mackie said.

The Rocky Mountain News in Denver closed earlier this month after its owner, E.W. Scripps Co., couldn't find a buyer. In Arizona, Gannett Co.'s Tucson Citizen is set to close Saturday, leaving one newspaper in that city.

And last month Hearst said it would close or sell the San Francisco Chronicle if the newspaper couldn't slash expenses in coming weeks.

The U.S. newspaper industry has seen ad revenue fall in recent years as advertisers migrate to the Internet, particularly to sites offering free or low-cost alternatives for classified ads. Starting last summer, the recession intensified the decline in advertising revenue in all categories.

Four newspaper companies, including the owners of the Los Angeles Times, Chicago Tribune and The Philadelphia Inquirer, have sought bankruptcy protection in recent months.

Hearst's decision to abandon the Post-Intelligencer's newspaper format in favor of an Internet-only version is the first for a large American newspaper, raising questions about whether the company can make money in a medium where others have come up short.

While the P-I's Web site ensures it a continued presence in the Seattle news market, it will likely be a pared-down version of its former self — with a heavy reliance on blogs and links to other news outlets.

The P-I had 181 employees, but Managing Editor David McCumber said the Web site would employ about 20 in the newsroom operation and another 20 to sell ads. He said he would not be working on the new site.

Meanwhile, with backing from three entrepreneurs, staffers of the recently shuttered Rocky Mountain News plan to start an online news publication if they can get 50,000 paying subscribers by April 23 — what would have been the News' 150th anniversary.

The local venture, InDenverTimes.com, would go live on May 4 if backers meet their subscription goal.

source:Herald Tribune

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By Alexander Kwiatkowski and Christian Schmollinger

Oil fell from a two-month high in New York on speculation U.S. stockpiles gained last week because of lower demand in the world’s largest crude consumer.

Crude oil inventories climbed 1 million barrels in the week ended March 13 from 351.3 million barrels, according to estimates in a Bloomberg survey before an Energy Department report tomorrow. Oil also dropped as European stocks fell for the first time in six days.

“We have very high crude oil inventories in the U.S.” said Sintje Diek, an HSH Nordbank analyst in Hamburg. “We still have very weak oil demand. We will remain in this trading range of $45 to $50 a barrel for the coming weeks.”

Crude oil for April delivery fell as much as 82 cents, or 1.7 percent, to $46.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $47.10 a barrel at 9:22 a.m. London time.

Yesterday, April futures rose $1.10 to $47.35 a barrel, the highest settlement since Jan. 6. Prices have gained 5.1 percent this year. Crude in New York tumbled from a record $147.27 a barrel in July because of the economic contraction in major consuming countries.

European stocks fell after American Express Co. reported rising credit-card defaults. Europe’s Dow Jones Stoxx 600 Index dropped 2 percent to 171.22 at 8:47 a.m. in London, ending a five-day, 9.6 percent surge.

The Organization of Petroleum Exporting Countries deferred another production cut for at least 11 weeks at its weekend meeting. OPEC has reduced daily output targets by 4.2 million barrels since September to prevent a glut and slow the decline in prices. The group is scheduled to meet again on May 28.

Brent Crude

Brent crude oil for May settlement fell as much as $1.24, or 2.7 percent, to $45.22 a barrel, and was trading at $45.97 on London’s ICE Futures Europe exchange at 9:23 a.m. in London.

Saudi Arabia, the world’s biggest oil exporter, is the only member to cut more output than agreed last year, according to a monthly OPEC report released on March 13. Iran and Nigeria have made good on only about half of their promised reductions, the report showed.

Saudi Arabia is willing to keep oil output below its OPEC quota level of about 8 million barrels a day unless consumers want more, Saudi Arabian Oil Minister Ali al-Naimi said yesterday.

“Maybe we will see even lower prices because OPEC decided not to make further cuts,” said Diek of HSH Nordbank. “Maybe compliance is not enough.”

source: Bloomberg

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The euro climbed back towards an 11-week high against the yen and a five-week high against the dollar on Tuesday as a rise in regional share prices pointed to some recovery in appetite for risk.

The yen and the dollar slipped against higher-yielding currencies, with global stock markets having shown signs of stabilising over the past couple of weeks and currency market volatility lessening.

"The dollar and the yen had been bought before on risk aversion but the pendulum is swinging the other way," said a trader for a major Japanese bank.

"There has been a strange sort of alleviation in strains, a sense that a huge economic depression may be averted, and this seems to be spurring buying of the euro and the Australian dollar," he said.

The euro rose 0.6 percent to 128.15 yen , nearing the previous day's peak of 128.74 yen, which was the highest since late December.

The single European currency rose 0.4 percent against the dollar to $1.3016 , inching up towards Monday's high of $1.3072, which was the highest since Feb. 10. The dollar rose 0.3 percent against the yen to 98.44 yen .

During the global financial crisis the dollar and the yen have often been bought when risk appetite fell and worries about the outlook for the global economy intensified.

When risk appetite improves, the dollar and yen tend to come under pressure.

The yen's safe-haven appeal has, however, lost some of its lustre due to a rapid deterioration in Japan's economy, with the trade balance falling into deficit, and political uncertainty with an unpopular government facing an election that must be held by October.

The benchmark Nikkei share average rose 3.3 percent .N225.

EURO TO RALLY FURTHER?

With its rally this week, the euro is showing tentative signs of breaking above a range of around $1.2500 to $1.3000 that has held for the past month and a half, said a trader for a Japanese trust bank.
But it is still too early to say with conviction whether the euro is ready to break out of this zone, he said.

"If the euro can clear the $1.3000 level at the end of the week, expectations for a further rally will probably grow," the trader said.

The Australian dollar rose 0.4 percent against the yen to 65.01 yen , nearing a two-month high of 65.36 yen hit on Monday.

Against the dollar, the Australian dollar rose 0.3 percent to $0.6609 , hovering near a one-month high of $0.6638 hit on Monday. Australia's central bank decided this month to keep interest rates unchanged at a record low 3.25 percent, surprising many in the markets who had bet on a cut.

The minutes of that meeting showed that the Reserve Bank of Australia considered cutting interest rates again at its policy meeting earlier this month but chose to pause so as to gauge the effect of past easing. [ID:nSYC000169]

The Bank of Japan is seen likely to keep interest rates unchanged at 0.10 percent at a two-day policy meeting that ends on Wednesday [ID:nT314125].

source:Reuters

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By David Glovin, David Voreacos and Erik Larson


U.S. prosecutors shed new light yesterday on how they believe Bernard Madoff’s subordinates helped him operate a $64.8 billion Ponzi scheme, without saying whether those employees knew they were defrauding investors.

Madoff, 70, will plead guilty tomorrow to fraud, money laundering and perjury charges, his lawyer said yesterday. Madoff told 4,800 investors in November that their accounts held $64.8 billion, though their holdings were a “small fraction” of that, prosecutors alleged in 11 charges filed in Manhattan federal court.

The money manager told his employees to create false account documents and trade confirmations reflecting phony returns so as to transfer funds while giving the appearance of legitimate trades, and to generate false financial statements for regulators, prosecutors said. Those actions gave the appearance of a “legitimate investment advisory business,” according to the government, which said the investigation of the largest Ponzi scheme in U.S. history is continuing. No employees have been charged with any wrongdoing.

“The issue will be whether the government can establish that they knew what in the paper was in fact phony,” Christopher Steskal, a former federal prosecutor, said in a telephone interview. “If the facts show it, they will likely pursue those people. It seems improbable that he would do it alone.”

Madoff was arrested Dec. 11 and charged with one count of securities fraud for using billions of dollars from new investors to pay off old ones. Investors in Madoff’s New York-based firm, Bernard L. Madoff Investment Securities LLC, included celebrities, charities and money managers from around the world.

150-Year Sentence

Madoff is charged with securities fraud, mail fraud, wire fraud, investment adviser fraud, three counts of money laundering, false statements, perjury, false filings with the U.S. Securities and Exchange Commission and theft from an employee benefit plan. Madoff, who is free on $10 million bond, faces a prison sentence of as long as 150 years, prosecutors said.

In court yesterday, defense attorney Ira Sorkin disclosed Madoff’s plan to plead guilty. U.S. District Judge Denny Chin held a hearing to ask Madoff if he would waive Sorkin’s possible conflicts of interest. Madoff, wearing a gray suit and wire- framed glasses, gave brief answers to more than 50 questions from Chin about the alleged conflicts. Madoff didn’t discuss a guilty plea.

No Plea Bargain

Assistant U.S. Attorney Marc Litt said Madoff doesn’t have a plea bargain. Through such deals, defendants often receive some benefit for pleading guilty, such as a reduced sentence, in return for providing details about a crime. The lack of a plea deal may suggest Madoff isn’t helping prosecutors determine who may have helped him in the alleged fraud. Litt said Madoff will be required to plead guilty to all 11 counts.

The absence of a plea bargain is “unusual,” said Richard Strassberg, a lawyer with Goodwin Procter LLP in New York. He said the government probably didn’t offer a deal.

“If that’s what happened, the government viewed the scope of the conduct to be so egregious that a plea deal wasn’t warranted,” Strassberg said in an interview.

By not entering a plea deal, Madoff may be trying to protect employees of his firm, Steskal said.

Madoff’s brother Peter was chief compliance officer at the company, and his sons Mark and Andrew held senior positions in the market-making and proprietary trading businesses. None of Madoff’s family members have been accused of any wrongdoing.

Her Own Lawyer

Bernard Madoff’s wife, Ruth, who had been represented by Sorkin, will hire her own lawyer, Sorkin said yesterday.

An attorney for Peter Madoff, John “Rusty” Wing, didn’t return a call seeking comment. Martin Flumenbaum, an attorney for the sons, has said they “were not involved in the firm’s asset management business” and “had no knowledge whatsoever of the fraud.”

Madoff, who promised annual returns of up to 46 percent, “created a broad infrastructure” to give the appearance of “a legitimate investment advisory business,” according to new charges filed against him yesterday. His back-office staff had little or no experience and at Madoff’s direction misled clients about investments, prosecutors alleged in court papers.

“Certainly lower level employees are unlikely to be involved, but people with auditing function or authority to access accounts or make trades are more likely to have knowledge of the alleged fraud,” Steskal said.

Prosecutors and regulators have been probing whether the chief financial officer at the advisory firm, Frank DiPascali Jr., knew of the fraud, according to people familiar with the case. DiPascali has denied wrongdoing. His lawyer, Marc Mukasey, didn’t return a call seeking comment.

Madoff’s Auditor

Andrew Lankler, a lawyer for Madoff’s auditor, David Friehling, declined to comment. A call to Madoff’s longtime aide, Annette Bongiorno, wasn’t immediately returned. They aren’t accused of wrongdoing.

Madoff was able to defraud his investors by claiming he used a “split-strike conversion strategy” in which he promised to invest in stocks that mimicked the price movement of the Standard & Poor’s 100 Index, while “opportunistically” timing purchases, Acting Manhattan U.S. Attorney Lev Dassin alleged in a statement.

The new allegations include a claim that Madoff “repeatedly lied” to the SEC in written submissions and sworn testimony during questioning in 2006. Prosecutors also said Madoff used $250 million from his advisory business to finance market-making and proprietary trading operations. Madoff stole $10 million from 35 labor union pension funds, prosecutors alleged.

$170 Billion

In a separate court filing, the government said they will seek to force Madoff to forfeit more than $170 billion, representing “proceeds traceable” to the alleged scheme. The figure represents funds that flowed through Madoff’s firm during its operation, prosecutors said.

Sorkin said in a letter to Chin that the monies prosecutors seek are “grossly overstated -- and misleading -- even for a case of this magnitude.”

“The issues related to forfeiture, restitution and sentencing in this matter are highly complex and will require extensive time to resolve,” Sorkin wrote.

At yesterday’s hearing, Chin asked Madoff whether he understood that his lawyer might have a conflict of interest because Sorkin’s sons held an account that was invested with Madoff.

“I understand that potentially, in the issue of restitution, his interest might be divided and he might not defend me in a way that’s most beneficial to me,” Madoff said as he waived his lawyer’s conflict of interest.

The criminal case is U.S. v. Madoff, 08-cr-00213, U.S. District Court for the Southern District of New York (Manhattan).

source :Bloomberg

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by:Matt Egan

The Dow surged nearly 400 points Tuesday -- its best day in an otherwise dismal 2009 -- as Wall Street cheered after embattled Citigroup said it was profitable during the first two months of the year.

Today’s Markets

The Dow Jones Industrial Average jumped 379.44 points, or 5.80%, to 6926.49, the S&P 500 rose 43.07 points, or 6.37%, to 719.60 and the Nasdaq Composite picked up 89.64 points, or 7.07%, to 1358.28. The consumer-friendly FOX 50 added 31.86 points, or 6.24%, to 542.69.

The markets were in the green for the entire trading day in a broad-based rally that ended at session highs. The gains were even stronger for the Nasdaq Composite, which enjoyed its biggest one-day percentage gain since October 2008.

“We were looking for a little bit of good news and we got it from Citigroup,” said Paul Nolte, director of investments at Hinsdale Associates. “As much as we get excited about [this rally], the key will be whether we can rally for more than one day.

Aside from positive comments from Citigroup (C) CEO Vikram Pandit, the markets were lifted Tuesday by a huge rally in big-name tech stocks like Google (GOOG), comments about a possible reinstatement of the "uptick" rule and Dow Chemical’s (DOW) agreement to buy rival Rohm & Haas (ROH).

“The market was ready for something. It’s been dramatically oversold,” NYSE trader Ted Weisberg told FOX Business. “Until something fundamentally changes, we are still going to be in difficult territory. But we’ll take what we can get.”

Tuesday's rally represents the Dow's biggest one-day rally since Nov. 24 when it jumped 396 points. The benchmark index, which hasn't seen two straight days of gains since Feb. 6 and was trading at its lowest levels since April 1997, is still off by 21% year-to-date.

“We seem to be shocked by an up day, which I guess is natural when you are down 50% from the peak. The fact that it doesn’t take much to bounce an oversold market is pretty well displayed today,” said Art Hogan, chief market strategist at Jefferies & Co.

All 30 components of the Dow closed in the green, led by double-digit gains for financial companies JPMorgan Chase (JPM), Citi, Bank of America (BAC) and General Electric (GE). JPMorgan alone accounted for 28 points of the gain on the index. Defensive stocks like McDonald's (MCD) and Coca-Cola (KO) saw more modest gains but still closed in positive territory.

The Nasdaq Composite jumped even further than the broader market Tuesday as big-name tech stocks like Cisco (CSCO) and Apple (AAPL) recovered from Monday’s slide. Tech stocks were helped by chip maker Texas Instruments, which raised its quarterly outlook slightly even as it said no recovery in the chip market is in sight.

Citi-Sized Rally

Financial stocks and market sentiment received a big shot in the arm Tuesday from Pandit, who wrote a memo to Citi employees saying the embattled bank is having its best quarter-to-date performance since the start of the credit crisis in the third quarter of 2007. The comments were unexpected as Citi has received three rescues from the government and its shares plunged below $1 last week for the first time ever. Also, the bank lost $8.29 billion last quarter, its fifth straight quarterly loss. Citi's stocks surged almost 40% Tuesday.

The financial sector surged almost 15% in response on Tuesday and some individual banks like State Street (STT) and PNC Financial (PNC) jumped even further.

The Pandit memo showed Wall Street that “these guys aren’t at the edge of a cliff,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “I never thought they were because they have an unlimited checkbook” through the backing the bank has received from the Federal Reserve, he said.

The Citi news comes as The Wall Street Journal reported U.S. officials are considering further steps to stabilize the bank if its problems mount. Officials described the talks, which are wide-ranging and preliminary, as “contingency planning” and said no new rescue was imminent, the paper reported.

The markets were also boosted by U.S. Rep. Barney Frank, who told reporters he expects the "uptick" rule to be restored in about a month. The rule would be aimed at slowing the pace of short selling. Frank also said the mark-to-market accounting rule, which has forced billions of writedowns for banks, must be improved and made more flexible.

Meanwhile, Federal Reserve Chairman Ben Bernanke made the case for an overhaul of financial regulations in a speech on Tuesday and said officials are ready “to ensure that systemically important financial institutions continue to be able to meet their commitments.”

In the commodity markets, crude oil's hot streak was torpedoed by a late-day slide. The price of a barrel of crude closed at $45.71, down $1.36 on the day. Gold ended in the red for the 10th time out of the last 12 days, settling at $859.90 per ounce, down $22.10.

Corporate Movers

Dow Chemical (DOW) relented by agreeing to acquire rival Rohm & Haas (ROH) for the original $78-a-share price plus penalties, settling a legal battle that nearly went to trial. However, the new deal aims to bolster Dow’s financial security by including up to $3 billion in new investments from two top Rohm & Haas shareholders.

United Technologies (UTX) unveiled plans to slash 11,600 jobs this year. The world's largest elevator and air condition maker also cut its 2009 earnings and revenue guidance, saying the “economic recovery previously anticipated in the second half of 2009 appears unlikely.”

Tiffany (TIF) is planning to shut its underperforming Iridesse pearl jewelry retail chain that was opened in 2004 due to the recession, the Journal reported, citing an internal memo.

Genentech (DNA) is close to selling itself to majority owner Roche (RHHBY) in a deal that would value the biotech giant at $46.7 billion, or $95 per share, the Journal reported. The two sides nearly announced the deal Monday and have been haggling over timing and closing conditions, the paper reported.

Bank of America (BAC) CEO Ken Lewis is mounting a full-court press to argue his struggling bank is not in the same condition as Citigroup (C), the Journal reported. Instead, in internal memos Lewis has argued BofA will not need more money and plans to “earn” its way out of the recession, the newspaper reported.

Office Depot (ODP) surged by more than 50% after the office supplies retailer said it believes its first-quarter results will be "significantly better" than the fourth quarter.

Merrill Lynch, which is now a unit of Bank of America (BAC), made a huge bet in Brazil last year by luring 10 investment bankers from rival banks, the Journal reported. However, the company’s investment bankers in Latin America brought in only $50 million through late December, while piling up more than $100 million in mostly compensation-related expenses.

Boeing (BA) reaffirmed it expects the first delivery of its widely-anticipated 787 Dreamliner in the first quarter of 2010.

Global Markets

European markets closed sharply higher across the board but Asian stocks ended mixed overnight.

The Dow Jones Euro Stoxx 50, which tracks the 50 largest companies in Europe, soared 6.05% to 1919.53, London's FTSE 100 rose 4.88% 3715.23 and Germany's DAX gained 5.28% to 3886.98.

In Asia, Japan's Nikkei 225 fell 0.44% to 7054.98 while Hong Kong's Hang Seng gained 3.08% to 11694.05. Australia's ASX 200 rose 0.95% to 3184.50.

source : fox Business

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